Volkswagen, Ford To Exit Auto Finance Business In India: Report
NEW DELHI (Reuters) - The auto financing arms of Volkswagen AG (OTC:VWAGY) and Ford Motor (NYSE:F) Co plan to stop giving new credit to car buyers and dealers in India and will exit from the country, sources aware of the development told Reuters.
Volkswagen (DE:VOWG_p) Finance Private Ltd, the German carmakers finance arm, stopped giving loans to car buyers in India last year and in May told dealers of all VW brands, which includes Volkswagen, Skoda and Audi, to find other financing, two sources with direct knowledge of the talks said.
Volkswagen Finance Private Ltd said in a statement that it had acquired a major stake in Indian loan brokerage portal KUWY Technologies to service its retail customers.
The auto finance arms are classified as non-banking financial companies (NBFCs) and they compete with banks for providing credit. But banks have access to cheaper funding so can offer loans at lower rates than those offered by NBFCs or shadow lenders.
Volkswagens plan to exit the financing business has surprised dealers, coming weeks ahead of the launch of Skodas new sport-utility vehicle (SUV) to boost sales in India, the two sources said.
Ford Credit, the automakers financing arm, stopped lending to car buyers at the end of last year and will cease credit to dealers by June 30, two separate sources said.
The decision to exit the financing business comes at a time when Ford is finalising a new strategy for India after ending ties with Mahindra & Mahindra on Dec. 31.